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By: Michael Kouskoutis
Recently, insurers for Coca-Cola denied coverage on a claim presented under a political risk policy, after a blockade prevented the beverage giant from importing supplies required for soft-drink production. The blockade was the result of political tumult in Nepal, when the Madhesi—an ethnic minority—blocked the India-Nepal border in protest of Nepal’s newly adopted constitution.
Coca-Cola filed suit against its insurers in a Georgia federal court, alleging breach of implied duty of good faith and fair dealing, seeking a declaratory judgment, $1 million in losses, bad faith and attorneys’ fees. The insurers recently moved to dismiss the suit, arguing that despite the policy’s New York choice-of-law provision, Georgia common law should apply because there exists no pertinent New York statute regarding good faith claims or attorneys’ fees. This argument is rooted in a rule recently discussed by the Georgia Supreme Court, that in the absence of a foreign statute on point, “at least with respect to a state where the common law is in force, a Georgia court will apply the common law as expounded by the courts of Georgia.” Coon v. Med. Ctr., Inc., 797 S.E.2d 828, 834, 300 Ga. 722, 729 (2017).
Further, the insurers urge that either way, neither New York nor Georgia common law permit such claims under these circumstances. Moreover, they argue that “breaching the duty of good faith and fair dealing supports only a breach of contract claim and does not provide the basis for a separate cause of action.”
These arguments add yet another layer of complexity over issues surrounding choice-of-law provisions, and insurers should keep in mind that the law chosen to govern a policy may not necessarily be the law that will govern. We will continue to keep insurers apprised of developments in this area as they occur.
If you have any questions or would like more information, please contact Michael Kouskoutis at email@example.com.